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VAT: EXEMPT SUPPLIES BY LOCAL AUTHORITIES

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Customs has now analysed the 64 responses received on the proposed changes to guidance in paragraphs 4.4 and 4.5 of...
Customs has now analysed the 64 responses received on the proposed changes to guidance in paragraphs 4.4 and 4.5 of Notice 749, following the high court decision in the case of London Borough of Haringey v Commissioners of Customs and Excise.

Many of the responses commented on the complexities of apportioning overheads and recharges and difficulties in identifying incidental supplies. There was a general concern that the change would impose an administrative burden on local authorities. However, almost without exception, those responding accepted the inevitability of the revision following the court decision.

There were useful suggestions on ways the calculations could be simplified and the timescale for making them. Customs are willing to take these on board insofar as they are seen to be practical, and will issue further guidance in due course.

The changes concern the recovery of input tax by local authorities on purchases made for exempt business supplies and activities that contain both taxable and exempt elements. Business Brief 1/96 announced we would revise this guidance and an information paper was issued inviting comments on the proposed text.

Anyone wishing to see a more detailed summary of the responses should contact Peter Gladdish or Kevin Brewer, Government and Education Branch, VAT Policy Directorate, Customs and Excise, New King's Beam House, 22 Upper Ground, London SE1 9PJ - or telephone 0171 865 5408.

The revised arrangements will come into effect on 1 April 1997.

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